When you create an estate plan in Texas, you have various legal tools to achieve specific objectives for your wealth and your loved ones’ interests. Many individuals and families utilize trusts for multiple purposes, including avoiding probate, protecting assets, and securing government benefits for long-term care. As a result, a trust may work for your estate plan. Understanding the various options for trusts in Texas can help you determine whether a trust makes sense for your estate planning goals.
Understanding Trusts
A trust is a legal structure under which a person, called the settlor, places assets under the management of a trustee for the benefit of one or more designated beneficiaries. The trustee manages the trust in accordance with the terms of the trust document created by the settlor, which outlines how the trustee should manage trust assets and pay principal or income from those assets to the beneficiaries.
Trusts differ from other estate planning tools, such as wills, in several ways. For example, a trust becomes effective when the settlor executes the trust document and funds the trust. Conversely, a will only takes effect upon a person’s death. Managing assets through a will requires probate, a public, often court-supervised process that can involve time and financial expense, depending on the size and complexity of a decedent’s estate.
Common Types of Trusts Used in Texas
Trusts come in many forms, each serving specific financial or legal purposes. Some of the most commonly used trusts in Texas include:
- Revocable living trusts
- Irrevocable trusts
- Medicaid trusts
- Special needs trusts
- Marital trusts
- Spendthrift trusts
Texas trusts involving married couples must also consider the state’s community property laws, which typically treat marital property as jointly owned by spouses. As a result, married individuals or couples considering incorporating trusts into their estate plans should seek legal advice to understand their options and restrictions.
When a Trust Makes Sense
You might consider incorporating a trust into your estate plan for various reasons, such as:
- You want to avoid the time and expense of probate to pass your estate on to your loved ones or other beneficiaries
- You want to pass on wealth privately instead of through the public process of probate
- You want to empower a trusted loved one or advisor to manage your assets in case you become incapacitated
- You want to provide for minor children or loved ones with special needs, even after your passing
- You want to protect the inheritances you pass to loved ones from their poor personal or financial decisions
- You have a blended family from a second or subsequent marriage and want to keep your estate planning intentions clear
Why You Might Not Need a Trust
However, some individuals or families might not need a trust, including in circumstances such as:
- An individual or couple has a small or simple estate with few, uncomplicated assets
- A person intends to leave their estate to loved ones they consider financially responsible
- An individual will primarily leave behind assets with beneficiary designations, such as pension/retirement accounts, life insurance policies, or bank/brokerage accounts
- A person has an estate that qualifies for Texas’s small estate affidavit process, which also avoids the complex formal probate proceeding
Our Firm Can Help You Determine If a Trust Is Right for You
When undertaking estate planning, having experienced legal counsel can help you assess the suitability of trusts for your planning goals. Contact Carroll Law Group, PLLC today for a free, confidential consultation with a trusts attorney to discuss whether incorporating a trust into your estate plan can help you achieve your legal and financial objectives.